Wetherspoon: Sales top £1bn but pre-tax profit slips

JDW labelled Britain’s tax system “unsustainable” as the company revealed that its taxes paid to Government in the period, £453.1m, amounted to almost 10 times its post-tax profit (£46.8m). This morning the company also announced that senior non-executive director John Herring is to stand down at its AGM in November.
Revenue increased 7.6% to £1.072bn for the 52 weeks to 24 July. Profit before tax and exceptional items was £66.8m (2010: £71m). After exceptional items, the figure was £61.4m, up 1.5%.
Operating profit before exceptional items was up 2.3% to £102.3m. After exceptionals, it was £96.9m (up 8.3%).
Operating margin, before exceptional items, decreased to 9.5% (2010: 10%), “mainly as a result of increases in bar and food costs, labour and utilities”. The operating margin after exceptional items was 9% (2010: 9%).
JD Wetherspoon opened 50 pubs in the period and said it intends to open a similar number in the current financial year.
Of the pubs opened in the year to 24 July, 34 were freehold. In addition, two pubs were closed, resulting in a total estate of 823 pubs at the financial year end.
The average development cost for a new pub (excluding the cost of freeholds) increased from £860k to £1.21m, “mainly as a result of an increased number of conversions from unlicensed premises”. The full-year depreciation charge was £44.4m (2010: £43.7m).
Wetherspoon’s £453.1m tax bill included £204.8m in VAT, £120.2m excise duty, PAYE and National Insurance of £65.2m, property taxes of £41.7m and corporation tax of £21.2m.
“We believe that the current level of tax levied on the pub industry is unsustainable and is directly leading to the closure of many pubs, which have become uncompetitive in relation to neighbouring countries and to supermarkets,” the firm said.
At the year end, total net bank borrowings excluding finance leases and derivatives were £429.8m (2010: £379.5m).
Net debt excluding derivatives has increased, owing to 50 new pub openings costing £87.6m, reinvestment of £38.4m, share buybacks of £32.8m and dividend payments of £5.2m. Year-end net-debt-to-ebitda was 2.98 times (2010: 2.70 times).
In addition, JDW had £120.2m (2010: £170.5m) of unutilised banking facilities and cash balances at the year end, with total facilities of £550m (2010: £550.0 million).
Following the year end, the company concluded an amendment and restatement of its existing banking facility. The new non-amortising £555-million four-year-and-eight-month facility, expiring in March 2016, was put in place, with a syndicate of nine existing lenders. Total facilities now available, including an overdraft, are £57m.
Total dividend for the year was 12p per share (2010: total of 19p, including 7p special dividend per share). During the year, 7,585,000 shares (representing approximately 5% of the issued share capital) were purchased by the company for cancellation, at a total cost of £32.8m, representing an average cost per share of 428p.

Tax disparity​
Chairman Tim Martin said: “I am pleased to report a year of further progress for the company, with record sales and operating profit, although profit before tax was lower than last year as a result of higher interest charges.
“The biggest danger to the pub industry is the tax disparity between supermarkets and pubs, creating a serious and unsustainable competitive disadvantage. In addition, our pubs pay far higher VAT than those of our nearest neighbours, Ireland and France, as well as having the second highest rates of excise duty on beer and wine in Europe.
“The well documented increases in areas such as utilities and bar and food supplies, combined with ongoing pressure on consumers income continue to make this a tough trading environment. Nonetheless, given our resilient sales, profit and cash flow, together with the potential to open further new pubs, the board is aiming for a reasonable outcome in the current financial year.”
Meanwhile, like-for-like sales in the six weeks to 4 September increased 0.4%, and total sales were up 6.7%.
The company said: “The well-documented increases in areas such as utilities and bar and food supplies, combined with ongoing pressure on consumers’ income continue to make this a tough trading environment.

"Nonetheless, given our resilient sales, profit and cash flow, together with the potential to open further new pubs, the board is aiming for a reasonable outcome in the current financial year.”